AutoNation 2007 Annual Report Download - page 63

Table of Contents
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0.725%. Additionally, the credit agreement termination date was extended from July 14, 2010, to July 18, 2012, and certain other terms and
conditions were modified as a result of this amendment. We incurred $1.6 million of expenses in connection with this modification during
2007, which are included as a component of Other Interest Expense in the accompanying Consolidated Income Statements.
The credit spread charged for the revolving credit facility and term loan facility is impacted by our senior unsecured credit ratings. On
November 29, 2007, Standard and Poor’s Rating Services revised its outlook for AutoNation to negative from stable.
Our senior unsecured notes and borrowings under the credit agreement are guaranteed by substantially all of our subsidiaries. Within the
meaning of Regulation S-X, Rule 3-10, AutoNation, Inc., (the parent company) has no independent assets or operations, the guarantees of its
subsidiaries are full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries are minor.
Other Debt
At December 31, 2007, we also had $14.1 million of 9% senior unsecured notes due August 1, 2008. The 9% senior unsecured notes are
guaranteed by substantially all of our subsidiaries. As discussed above, in April 2006 we purchased $309.4 million aggregate principal amount
of the 9% senior unsecured notes. As of April 12, 2006, covenants related to the 9% senior unsecured notes were substantially eliminated as a
result of the successful completion of the consent solicitation. The remaining aggregate principal amount of 9% senior unsecured notes was not
tendered for purchase and, accordingly, remains outstanding.
At December 31, 2007, we had $239.7 million outstanding under a mortgage facility with an automotive manufacturer’s captive finance
subsidiary. The mortgage facility was refinanced under a new facility in November 2007 to provide a fixed interest rate (5.864%) and provide
financing secured by 10-year mortgages on certain of our store properties. In connection with this refinancing, in 2007 we received net proceeds
of approximately $126.4 million and recorded $1.0 million of expenses, which are included as a component of Other Interest Expense in the
accompanying Consolidated Income Statements. Prior to this refinancing, the facility utilized LIBOR-based interest rates. The facility’s interest
rates averaged 6.5% for 2007 and 6.4% for 2006.
During 2000, we entered into a sale-leaseback transaction involving our corporate headquarters facility that resulted in net proceeds of
approximately $52.1 million. This transaction was accounted for as a financing lease, wherein the property remains on the books and
continues to be depreciated. We have the option to renew the lease at the end of the ten-year lease term subject to certain conditions. The gain on
this transaction has been deferred and will be recognized at the end of the lease term, including renewals. The remaining obligation related to this
transaction of $40.4 million at December 31, 2007, and $42.8 million at December 31, 2006, is included in Other Debt in the above table.
Restrictions and Covenants
Our senior unsecured notes issued in April 2006, credit agreement, and mortgage facility contain numerous customary financial and
operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing
indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities.
The indenture for our senior unsecured notes issued in April 2006 restricts our ability to make payments in connection with share
repurchases, dividends, debt retirement, investments, and similar matters to a cumulative aggregate amount that is limited to $500.0 million
plus 50% of our cumulative consolidated net income (as defined in the indenture) since April 1, 2006, the net proceeds of stock option exercises,
and certain other items, subject to certain exceptions and conditions set forth in the indenture. As of December 31, 2007, the amended credit
agreement requires us to meet certain financial covenants, as defined, requiring the
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